Agency Problem And Venture Debt Financing Of Start-ups

Start-ups play an important role in promoting technological progress,job creation,and economic growth.However,due to information asymmetry and agency problems,it is difficult for start-ups to obtain external financing,especially debt financing.In recent years,more and more start-up companies have realized venture debt financing.In the United States,venture debt account for 15% of the total financing of start-ups,and in the UK,this ratio is also higher than 10%.In order to promote the development of the venture debt market and alleviate the difficulty of financing for start-ups,China proposed the concept of "Investment and Loan Cooperation" in 2016,and launched a pilot investment and loan cooperation bank to encourage commercial banks to develop venture debt businesses.However,due to the late start of China's venture debt business,and the incomplete system,it is still difficult for start-ups to obtain venture debt financing.Therefore,in order to broaden the financing channels of start-ups and improve their financing availability,it is of great significance to study the venture debt financing mechanism of start-ups.This article mainly adopts the method of normative analysis combined with theoretical modeling.First,with the agency theory and the capital structure theory,we summarize and sort out the relevant literature on the venture debt financing mechanism of the start-ups.Secondly,establish a venture financing model for start-ups,discuss the financing mechanism under three different financing modes: "Only Loan and No Investment","Only Investment and No Loan" and "Investment and Loan Cooperation",and analyze the impact of the agency problems and related factors on financing availability and efficiency.In order to enhance the practical significance of the model,we take American Silicon Valley Bank and China's investment and loan cooperation banks as examples to provide corroboration for the model.The conclusions show that:(1)From the perspective of financing availability,when there is a high proportion of low-quality enterprises in the market,and the maximum proportion of warrants acceptable to the bank and the value of the collateral of the enterprises are low,the "Only Investment and No Loan" model is the best,followed by the "Investment and Loan Cooperation" model.(2)From the perspective of financing efficiency,when the proportion of the largest warrants accepted by the bank is relatively low,the "Investment and Loan Cooperation" model is better than the "Only Loan and No Investment" model.When the probability of success is low,with a lack of highquality collateral,and the rate of return required by venture capitalists is relatively high,the "Investment and Loan Cooperation" model is better than the "Only Investment and No Loan" model.(3)The value uncertainty of collateral reduces the availability of financing in the "Only Loan and No Investment" model,but has no effect on the financing availability in the "Investment and Loan Cooperation" model.(4)The problem of "collusion" between entrepreneurs and venture capitalists changes the optimal financing structure of start-ups under the "Investment and Loan Cooperation" model,but it has no effect on the availability of total financing.